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This incident apparently took place in 2006 sometime. I found a blog from February 2007 which talks about this in the past tense. This same blog has an interesting (if unverifiable by me) discussion of PRC submarine capabilities. For example:

"... The Song Incident: One of the two patrols conducted in 2006 appears to have been the widely reported surfacing of a Song-class diesel-electric submarine near the U.S. aircraft carrier USS Kitty Hawk in the South China Sea. The news media and pundits dramatized the incident as an example of China expanding its submarine operations, the Chinese government downplayed the reports as inaccurate, and the Pentagon said the media made too much of the incident...."

There is also an interesting graphic, derived from data obtained (according to the blog) by the Freedom of Information Act which portrays the number of patrols carried out by PRC submarines up until 2006:

They say there were only TWO patrols by the entire PRC sub force during 2006, and the "Kitty Hawk Incident" was supposedly one of them.

I will say this much: I must take with a grain of salt any information from this organization that runs the Strategic Security Blog website (The Federation of American Scientists) because they do indeed have a political agenda, that of disarmament. That said, it meets their political goals to downplay reports of a strong PRC submarine force or any increase in its capabilities because I suspect (don't know if it is true, someone else may know better) they feel that is how the government gets more money to fund the military in the USA. I think these might be the same people who complained the US deliberately overestimated the Soviet military might during the Cold War to justify more military expenditures for the US military.

I hesitate to shill for this site, but it seems to have more info up front in this article than anywhere else...all others seem to just make guesses. Check it out and decide for yourselves at The Strategic Security Blog (Run by the Federation of American Scientists)

I am interested in hearing what others think.

For the record, I personally think we need to massively build up our diminished sub forces and anemic antisubmarine forces, not just for the PRC, but also for a resurgent and militaristic Russia, Venezuela, Iran...etc.